1. Field of the Invention
The present invention relates to the field of mass merchandising and, in particular, the sale and distribution of products in accordance with agreements including volume commitments and price guarantees.
2. Description of the Related Art
Over the past two decades, while U.S. gross spending on food and food-related products has grown to over $300 billion dollars per year, the market share of conventional supermarkets and groceries has dwindled significantly below a once controlling interest. In large part, this drop in market share has been caused by competition from bulk purchasing clubs.
Bulk purchasing clubs, or warehouse clubs, have identified and are exploiting a lucrative portion of the food products market; those customers who are willing to make bulk purchases in exchange for discount prices. Such bulk sales have cut directly into the volume of conventional supermarkets and groceries.
With market share steadily eroding, it has become necessary for supermarkets and groceries to attempt to stem the loss of customers to warehouse clubs. Due to the fundamental differences in their businesses, however, it is difficult for a conventional supermarket to compete with a bulk purchasing club.
Bulk purchasing clubs represent a very specialized portion of the food products market. They are able to locate in less expensive areas--often occupying warehouse type facilities--while still attracting customers desirous of discount pricing. They are able to stock a very limited number of products; customers do not expect every product to be available in quantity. They sell larger quantities of product per transaction, thereby realizing lower per-sale costs.
Bulk purchasing clubs are not expected to offer the amenities often provided by supermarkets, such as non-food product goods and services, check-cashing services, and bagging. Further, customers, also known as Omembers,O are often willing to pay a membership fee for the right to belong to the Oclub.O Such fees help offset what are traditionally thin margins.
In contrast, conventional supermarkets and groceries must locate in convenient areas for their customers, thus often realizing higher real estate costs. They must stock a much larger number of products in order to attract customers, and they have relatively higher transaction costs due to the typically large quantity of small items per purchase. To compete in their core business, conventional markets are expected to provide significant customer amenities, without the imposition of any type of service or membership fee.
In addition, supermarkets typically do not have the physical infrastructure necessary to compete in a traditional bulk selling environment. Because they are located in pricier facilities, they often have less floor and shelf space, with all available space being used by the large number of products they stock.
In one attempt to compete with bulk retailers, supermarkets have implemented frequent shopper programs. In a typical frequent shopper program, a customer is provided with a card identifier which is presented at each visit. Records are typically kept of customer purchases, and various discounts and benefits are typically provided to the customer in return for registration and subsequent use of the card.
Frequent shopper programs, however, suffer from relatively limited acceptance by customers. It is not atypical to have less than 25 percent usage of such programs by regular customers, and it is not financially prudent for these programs to provide prices that are competitive with bulk purchasing programs. Overall, frequent shopper programs do not provide a realistic alternative to customers interested in bulk purchasing. In fact, no systems or methods are known to applicants which permit conventional supermarkets to compete effectively against bulk purchasing clubs.
There thus exists a serious need for systems and processes which provide conventional supermarkets and grocery stores with the tools necessary to compete with bulk resellers. Without such systems and processes, their market shares and profitability will continue to decline. To be effective, such programs must provide customers with the same or similar levels of discount prices that strongly motivate bulk purchasing customers, while at the same time accommodating the constraints of the supermarket: that is, permitting the supermarket to continue to compete successfully in their core business.